If ABC Corporation's Debt Ratio Is Higher Than Its Major

question 73

Multiple Choice

If ABC Corporation's debt ratio is higher than its major competitors, ABC may:

• A) purchase treasury stock.
• B) sell treasury stock.
• C) invest in another company.
• D) be unable to pay its debts.

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Definitions:

Debt Ratio

A ratio indicating the ratio of a company's total liabilities to its overall assets.

Financial Leverage

The use of borrowed funds to enhance the potential return of an investment.

Total Liabilities

The sum of all financial obligations or debts that a company owes to outside parties at a given point in time.

Total Assets

The sum of all assets owned by a company, including current, fixed, tangible, and intangible assets, represented on the balance sheet.